The EU is set to impose historic interventions in the energy market to curb soaring prices, including considering an excess profit levy and caps on gas prices, according to a document obtained by the Brussels Playbook by POLITICO.
Experts from the European Commission, national capitals and embassies worked around the clock over the weekend to speed up emergency response plans to protect households and businesses – with many leaders warning against massive social unrest if prices are not controlled.
In a Sept. 4 document obtained by POLITICO, the Czech Presidency of the Council of the EU warned that Russia’s invasion of Ukraine, continued cuts to Moscow’s energy supply and its recent “disruption total and indefinite “Nord Stream pipeline” fuel rising inflation, and have serious repercussions for all businesses and all consumers.”
News from Nord Stream pushed the price of gas on Dutch benchmark hub TTF up 23% on Monday morning to €265 per megawatt hour.
In response, the Presidency got the ball rolling by testing the bloc’s 27-nation appetite for measures ranging from price caps to market controls, asking capitals to declare which measures they are prepared to back at a meeting of ministers of the EU energy this Friday.
The developments come after leaders of Germany’s ruling coalition parties finally agreed on Sunday to back the European Commission’s proposed electricity price levy for ‘inframarginal’ power plants – i.e. say electricity generators that do not use natural gas. Due to the way the EU electricity market works, these non-gas producers have made huge windfall profits because the price of electricity is set by the most expensive input, natural gas.
The Czech Presidency has compiled a list of proposals from across the bloc, to be considered ahead of Friday’s Energy Council.
Some capitals want price caps on gas from “specific jurisdictions” – i.e. Russia, which has militarized its energy exports. One idea being considered is a price cap at which companies can buy Russian gas, similar to oil price cap measures agreed last week by the G7, in a bid to limit the Kremlin’s ability to finance its war in Ukraine. .
Options for decoupling electricity and gas prices are also on the table, but significant disagreements remain between EU countries over whether and how to implement such a sensitive intervention.
Other market measures being considered include the provision of an immediate line of credit support for companies facing very high margin calls, changing trading rules on energy exchanges or temporarily suspending European electricity derivatives markets, among others.
Central European governments want the EU to release additional greenhouse gas emission allowances from the emissions trading scheme if the price exceeds a certain threshold – a proposal the European Commission is against. strongly oppose.
Commission President Ursula von der Leyen seeks to divide the proposals into a package of immediate interventions and longer-term reforms. Brussels will postpone to a later date some of those broader ideas that leaders are pushing for but countries cannot quickly agree on (such as the Spanish idea of implementing a gas subsidy or the call for Central Europe to limit emission prices) without giving a definite no.
The Czech Presidency wants countries to approve a range of proposals – including electricity price caps – at Friday’s Energy Council, tasking the Commission with drafting legislation based on Article 122 of the Treaty on the functioning of the EU, which allows countries to agree on emergency measures without the need to involve the European Parliament, diplomats have said.
Leaders of the bloc, along with European Council President Charles Michel, have called on the EU executive to act, as consumers and businesses grapple with a cost of living crisis.
Officials say the final legislation is expected to be unveiled at the same time as von der Leyen delivers his annual State of the European Union address on September 14.
This article has been updated with the latest gas prices.